Revolution Costs

It’s obvious that we might sometimes have the impression the freedom has no price on it. But, think again. It certainly might not have a price, but it definitely has a cost. Revolution costs a lot of money it would seem and the recent reports and analyses by the British bank HSBC show that the Arab Spring cost a total of roughly $800 billion. That’s the cost that will be incurred by the countries that have been the most affected by the Arab Spring, namely Egypt, Tunisia, Libya, Syria, Jordan, Lebanon and Bahrain. Each of those countries will have seen a fall in their Gross Domestic Product that is roughly equivalent to 35%. Had there not been revolutions in some of those seven countries and had the others not felt the knock-on effects, the people would have carried on as they were before: living in dictator states but maintaining some sort of status quoi in society. Although the money went in to lining the pockets of the omnipotent leaders (and still is in some cases).

Freedom has no PRICE, but Revolution COSTS

Freedom has no PRICE, but Revolution COSTS

Post-Revolutionary Effects

The report by HSBC stated: “The combination of a severe fiscal deterioration, and a decline in government effectiveness, security and the rule of law will weigh heavily on policymakers' efforts, even to bring employment back to pre-revolution levels”.

  • Gross Domestic Product for the region of the Middle East and North Africa stood at 4.9% in 2011.
  • It fell to 4.5% in 2012 and stands at 4% this year.
  • It is predicted to rise slightly to 4.2% in 2014.

But those are the figures that are for the whole region and individual countries are far worse off than that. The overall regional figure allows for the benefit of the oil-rich nations that have not been affected to be taken into account in the 4.2% predicted for next year’s GDP. Oil-rich states such as the United Arab Emirates have benefited from the uprising by seeing their exports in oil increase. But, there are some that are far worse off economically-speaking than others.

  • Egypt for example is well below that figure and is expected to grow by just 2.2% this year and by 3% in 2014 according to forecasts being made.
  • That figure will be insufficient to reduce unemployment at the present time according to economists as there is currently too much pressure on the state budget.
  • That figure may be revised even further in light of recent events that have taken place with the military coup and the ousting of former elected President Muhammad Mursi.

Economic Downside

Unemployment was one of the major factors that incited these populations to revolt. Yet, nothing has been done in those states to rectify the situation. Spending has been increased massively on social welfare and health to pacify the people. But at the same time there have been delays experienced because of the replacement of the administrative departments and the handing over from the pre-revolution period to the post-revolution one. As a result, there has been a drop in tax revenue and a slowdown in tax collection.

  • Unemployment has not been reduced and in fact in the aftermath of the revolutions, the people are even worse off than they were before.
  • Egypt had an unemployment rate that amounted to about 9% between 2007 and 2010.
  • It now stands at 13%.
  • Libya will only see a 0.7% expansion in economic growth this year.
  • Some had forecast that growth to be a staggering 15.9% just three months ago.
  • But uprising and protest strikes reducing oil exports have resulted in that figure dropping.

The Arab Spring caused the toppling of two leaders in Egypt if we count Muhammad Mursi. Muammar Qaddafi was ousted and killed in Libya. Bahrain suffered from unrest but the monarchy maintained its position. Syria has since 2011 been plunged into civil war, with the ensuing problems of chemical-weapons accusations and East-against-West heated stand-offs.

  • Output from the seven nations that are mentioned in the report will fall over the four-year period after the revolutions of 2011 from $2.9 trillion to just $2 trillion.

The Arab Springs unleashed a political turmoil that spread across the region. It unseated the autocratic leaders of the countries that had been in power for decades and it made life difficult for the strongmen that managed to stay in power such as Bachar al-Assad. The HSBC reports states just how difficult it will be to turn that situation around now: “Nearly three years on, the economic and human cost of the Arab Spring continues to mount. In the post-revolution states, the impact is obvious: we estimate the value of lost output will top USD800bn by the end of next year. In the [Gulf Cooperation Council], it is more indirect — increased dependence on energy revenues, rising breakeven oil prices, and a stalled reform programme. For both groups, it will be hard to reverse."

Perhaps HSBC might be right that it will cost billions to those economies. But, it doesn’t seem insurmountable.

  • When the Cold War ended with the fall of the Berlin Wall in 1989 the estimated cost of re-integrating countries that had been excluded from Europe meant that the West had to pass on between $1.5 trillion and $2 trillion (equivalent currency) to the taxpayers.

Today however, it is not purely financial worries that are stalling the economies. These countries clearly need structural reforms to change the way their societies are run. The only problem is that it would be irrational and foolish for the leaders of those countries to run the risk of seeing the people take to the streets again because of structural reforms that will result in nothing more than the suffering of the people in the immediate short-term.

Freedom has a cost. The cost is economic and it’s paid by the living standards of the populations that have worsened since the revolutions. But, sometimes it’s the price to pay when you want to oust a leader that has reduced your country to servile bondage and feudalism-like existence. Mao Zedong once said that “Revolution is not a dinner party”. Well, it might just be, but if it is, it’s an expensive one.

No revolution is free. The American Revolution cost over $14.8 million, with the Americans ending up $25 million in debt to other countries in addition to that sum. If it had assumed its debts to the private individuals that had loaned money to finance the war, then its national debt would have been $79 million. The US was overspending even back then.

 

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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1 Comment

  • tom kauser

    Reply Reply October 14, 2013

    I really am more confused than before! Why were there street riots? Growth and employment numbers maintained a level which doesn't suggest extreme unhappiness or willingness to die for change? The strong man strawman direction article presents is troubling considering money and power west bestowed on said bad rulers. The government of the Levant is modeled around mercantile exploitation by colonial puppet rulers with no regard to unemployment or growth. Expanding this goal into MENA proper was only a matter of time and DOLLARS. This Arab spring was an expensive import from the west on spoiling marrowbone and nothing more? Only a bankers love of chaos could spirit an after the facts report informing westerners that worst is better!

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